Does the Government care about childcare costs for working parents?

This April working parents across the country will get a shock – despite inflation running at 4.8 per cent the childcare costs they recieve under Working Tax Credit will be cut by 10 per cent. And there is no indication that things are going to get better. It remains unclear how childcare costs will be met under Universal Credit, with early indications that support may be even less than is available at present, and several recent Government consultations on new mandatory welfare to work programmes have been unable to commit to providing childcare for parents who are required by Jobcentre Plus to take part. It’s too early to call for sure but indications are that the Government’s position is becoming increasingly conservative: if work doesn’t pay you enough to cover your childcare costs then it’s time to get back into the kitchen (unless of course you’re a lone parent).

The childcare element of Tax Credits was introduced in April 2003, meeting up to 70 per cent childcare costs (up to a maximum of £300 a week for two or more children) for eligible working families (those with household incomes low enough to entitle them to tax credits and where both parents/a single parent are are working 16 hours or more each). In March 2006 eligible costs were increased to 80 per cent, meaning that the maximum amount payable per week effectively moved from £210 (70 per cent of £300) to £240. However, only families on the lowest incomes and with the highest childcare costs will have recieved the full amount – for every £1 a household earns they lose, under present rules, 39p of their Tax Credit award.

Apart from the increase in 2006, Labour failed to adjust the amount of childcare costs available to take account of inflation and also faced frequent criticism for refusing to increase the support available for larger families – regardless of whether a household had 2 or 10 children their maximum possible childcare entitlement remained at £240 a week. However, while Labour’s record in this area wasn’t perfect, the Government’s proposals to date are moving swiftly towards disaster for working families.

April’s cut will mean a maximum loss of over £1,500 for working households with childcare costs – meaning that families across the country will see the rewards from work decline. In addition, there are increasing signs that across the rest of its labour market programmes Government is no longer committed to covering childcare costs for parents who are mandated to take part. For example, its proposals for a workfare scheme specifically state that childcare costs for participants will not be met. Similarly, in a further consultation on making unemployed people’s attendance at training courses a condition of their benefit entitlement the Government state that while they anticipate that travel and childcare costs will be met for claimants ‘this is subject to availability of funding’. This could lead to the deeply unfair situation of parents claiming JSA (with female lone parents most likely to be affected) having their benefits stopped as they are unable to both comply with their Jobseeker’s agreements and care for their children.

Signs are that when Universal Credit is introduced things aren’t going to get much better. At best it appears that the same budget will be spread between more people, with the Government committed to “allocating some of the current support to those working fewer than 16 hours” and no suggestion that the available amounts will be adjusted for inflation between now and 2013. Recent statements that “tax relief for childcare and one-off payments for families is currently very generous” do not suggest that Ministers are minded to provide working families with additional costs – or that they understand the real problems that a lack of access to affordable childcare causes for working families: in a recent survey by the Daycare Trust one third of working mothers said that they struggled with childcare costs and two thirds of mothers said that childcare costs led them to consider not returning to work after having children.

I have blogged here previously on Iain Duncan Smith’s ambivalence about reducing work incentives for ‘second’ earners. It seems that this deeply conservative understanding of the labour market is now spreading to the Department’s approach to childcare costs – if you think that children are best cared for by their mothers, and labour under the misbelief that most families can meet their living costs on one salary and that our society can afford to grow its economy without fully utilising the skills and experiences of working women, then it doesn’t matter a bit if the amount of childcare you offer households falls. Lone parents, arguably those with the most to lose from this new policy (forced to look for work under the Department’s new benefit rules but now more likely than ever not to be able to afford the childcare costs of employment), are by this worldview also not a key concern – maybe by making their lives harder the Department believes that these (mainly) women will be incentivised towards married life as soon as possible.

We’ve already heard the equalities Minister welcome Christine Hendricks as a role model for modern women – it now seems increasingly likely that it’s not just her figure that the Government would like us to replicate (although as of the end of series 4 she was still working – the breadwinner model failed as her husband didn’t earn enough).

Written by Nicola Smith

I’m Head of the Economic and Social Affairs Department at the TUC. I also represent the TUC on the Social Security Advisory Committee. My posts may therefore range from the environment to the welfare state via macro-economic policy but will inevit…

i am currently on maternity leave and a single parent and before finishing i was only 12 hours a week i am looking for a new job to increase to 16 hours and was wondering when the changes of working tax credits for people to work 24 hours is taking place.

If you are a single parent you won’t be affected by the new hours rules – the 24 hours requirement will only affect couples. The change for couples will come in from April 2012. Few details about the policy are currently available, but there is a little more information here on Direct Gov: http://www.direct.gov.uk/en/Nl1/Newsroom/SpendingReview/DG_191682